All Forum Posts by: Lisa Phillips

These pics inspire me even more than I already!! Thank you everyone showing this visual. I would love for the skeptics to take a look!

I have before and after of my other properties here:

http://www.affordablerealestateinvestments.com/gallery/

But here is my finished Richmond Home (my most recent)

Just want people to know: Just because its a Working Class Neighborhood (WCN for short), does not mean you have to skimp on the repairs and renovation...I paid 25k for this property, and put about 25k in new repairs (big ticket items needed, more than I put in the past, but if it needs new anything, I repair on the front end, not back end). Previous rehabs were 10k for 35k property, and 23k for 13k rehab.

This is an excellent post @Sharad M. , because the visual does so much for people to understand whats available, abundant, and cash flows well. I'll post more tonight.

Hi @Douglas Brundin, I love this thread! I will check in everyday.

My 2 cents:

Capital constraints, as well as an instinctive feeling that all the negativity and bad-mouthing surrounding this just COULDN'T be that bad, and I thought there was a level of bias in them. I just wanted to prove that it could work, really, since i grew up in the safest neighborhood people on the other side of town thought was crime infested. I knew there was an air of unreality since I lived it. And lastly, using my Leveraged Analysis Technique I came up with to vet the properties...the rents were too d*mn high to pass it up! ;-)

However, as to the repair problems: That's more to do with how you fix the place up when you first acquire it. I have been very clear that since I bought this at a low price, I take care of my homes during the original renovation as if it was my child. WCNs are older homes for the most part, and most times I have completely re-plumbed, installed new roofs, and sometimes new HVAC systems. These are big ticket items but ESSENTIAL Key Items any home needs to be comfortable. New flooring tops it, so at the end there are VERY little repairs need it, with the warranties lasting at least 10 years. Good quality up front and all. Very few maintenance problems over the years.

My motto is: If its going to cause problems in the next 3-5 years, I rip it off and get a new one. Most of these homes have strong bones, so rehabbing shores it up so it can last 20-30 years.

@Sharad M. nice! I have had a few headaches, but most were related to dealing with city usually. If there was though, they all go back to me not being on my game as a landlord or as a rehabber. No headaches that were not self created, but then again, not just anyone gets in my property. @Sharad had it right, and this can be another subject: How well do you fix these units up? Do you cut corners because its not an A neighborhood, or do you bring your A game to the renovation. I have to believe that plays a large part of who you attract and how long you keep them.

Property Managers work in these neighborhoods, so they are very strict as well on tenant screening- they dont want to deal with the headache either (They dont get paid if they have to evict them later), so they treat the tenant screening process as if its their own home.

And, I may use WCN for Working Class Neighborhood! Its easier to use.

I would say about 5 min per month to 1 hrs, and that is strictly to monitor the property manager.

It depends on how good the management company is if its 5 min or an hour. If they are FANTASTIC (which two of them are), I just check the owner statements they send, verify that the accounting adds up, and deposit checks. The other is fair, but I have to keep on them for random items: If there is an accounting error, verifying work completed by having them send pictures, etc. A bit more interaction.

My baltimore PM is fine, but I will get my own contractors for large jobs If I don't like their warranty. That involves me setting up times for the PM to meet them, which takesa bit of time. I dont mind, I save so much other time using PMs that I dont mind spending 1 hr a month on following up with property managers, when I get $2200/mo in rents.

More maintenance? No. If you fix your home and renovate it properly, make the upgrades and repairs when you buy them, you wont get that many repairs (seriously, I get less than 600/yr so far, but I fix my properties up correctly and don't skimp on repairs).

Tenants not paying: Why did you let them in your home in the first place? You can deny applicants. Not getting applicants? Your rents are too far priced above the neighborhood. @Kevin Perk has great articles on this, and they are in tuned with what I have experienced. If you are priced correctly, and are in a SAFE neighborhood (which isn't hard to find using my leveraged analysis technique I've discovered), no reason for you to not find working tenants. Be strict. I don't play on this one. If you don't have 3x the income, then you can't move in. Wait that extra month, or price it under the market to get more applicants. If they have good references and sufficient income, you're fine. If they don't, WAIT and don't compromise.

I think sometimes because of expectations, landlords in this price range can be MORE strict so they don't get bitten (again :-))

Anyone else? @Al Williamson @Dawn Anastasi

@Douglas B. At the end of the day, you approved that applicant to live in your property. If you let a bad, non paying apple in, there are NUMEROUS ways to screen for that. When I have been strict, I have not had issues. When I have made allowances, I have suffered regrets. Each case points to me, not the neighborhood.

Good luck on your launch!

@Engelo Rumora - I use property managers heavily in this strategy. 1) Its affordable with the cash flow you earn and 2) They need to get on these tenant quickly if they miss payment. I have strict criteria for tenants, and I pass on applications if I need to. You pay now, or pay later.

And in general, its one more system so your real estate can function without you, which is the point, right?

@Douglas Brundin - you hit the nail on the head. Lax tenant screening is part of it, and regardless of any neighborhood, you can't diverge from that. AND, how well did you do your repairs upfront?

And long term is okay if you need it, but I paid off my first asset within 3 years, and this last one is projected to be paid off in 2 years (since 1 is paying for the other), and the last one 2 years after that (2 paying for the last). I don't know about long term, i know about paid off asset earning you 800/mo within 2 years :-) So Douglas, my experience coincides with your analysis.

And, what are you guys doing?! Why are you not having long lasting tenants? Why are they moving out so quickly?? Working class neighborhoods I grew up in, and I currently invest in, people stay FOREVER. Moving is expensive. My neighbors in these areas have lived in the same house for 15,20 plus years. I guess I may be talking about a different neighborhood than you guys...

@Joel Owens I think you hit the nail on the head when you said no one holds this in perpetuity. That doesn't mean that this shouldn't be an avenue or vehicle, as you said, you start at where you can, and you work your way up to houses that are a surer bet for you.

I think what we have all said is valid, its just how, why, and how long you will implement this strategy. Personally, my 4.5 years is enough to let me know im on the right track. I've come up with my own analysis technique, which I call the Leveraged Analysis Technique (the name just fits with how I leverage resources) specifically for working class neighborhoods (WCNs). Its how I leverage internet resources that are NOW fully available and accurate, to do my property analysis.

Here's my method. I've been vlogging about it for some time, in detail with video demonstration. It includes crucial key metrics (Crime, Photos, Rents) but not schools -WCNs are a different play:

http://www.affordablerealestateinvestments.com/leveraged-analysis-technique/

So, I have had great success using this, and very minimal headaches, so because of that, I don't see myself moving too far away from lower priced houses, but if I do, its ONLY to minimize the amount of the renovation, not neighborhood and tenant related issues. Or, its just because I want a multi-family, but when you do this with knowledge, education, and do a good job at it (fix the property up nicely), that in itself limits the headaches you're going to encounter.

@Rob K Great post. I advocate buying in this price range, but I use a Leveraged Analysis Technique using crucial key metrics: 1) Crime Rates 2) Avg Rents 3) MLS Search Parameters.

Schools DO NOT enter the equation. For working class neighborhoods, public schools are just fine. They want to be CLOSE to a school, but aren't paying to send their kids for one. The analysis changes in this price range.

So yes, I advocate this strategy COMPLETELY, if the analysis is done in a leveraged way to know all key metrics before setting foot in the properties. And, its easy to do this leveraged analysis technique since so much is available on the internet.

I am actually going to write this step by step blueprint up. I would love to share it with this thread when I have it (later this evening). But 1) No war zones!! 2) Hire a GREAT property manager (if you want).

LUCKY FOR US, its not hard to avoid 1) and its not too hard to find a good PM for point 2)